Ethena Labs introduced to again its USDe artificial greenback with Bitcoin and a few crypto consultants have raised pink flags on the transfer as it might crash the crypto market. Amongst these consultants, on-chain information platform CryptoQuant CEO stated USDe backed by Bitcoin raises dangers of a possible Terra LUNA-like disaster.
CryptoQuant CEO Crimson Flags Ethena Backing USDe With Bitcoin
Ki Younger Ju, founder and CEO of CryptoQuant, stated Ethena onboarding Bitcoin as a backing asset to USDe isn’t excellent news for Bitcoin holders.
He believes backing USDe with Bitcoin dangers a possible contagion much like LUNA. Terra-LUNA maintained a peg for UST stablecoin by way of Bitcoin reserves on the Luna Basis Guard (LFG), which was bought to keep up the peg. The Terra-LUNA disaster crashed the crypto market and triggered bankruptcies for a number of crypto corporations corresponding to crypto hedge fund Three Arrows Capital.
CryptoQuant CEO particularly identified the problem in sustaining delta-neutral technique for BTC in bear market. In bull market, Ethena Labs plans to carry spot BTC and quick BTC as a part of money and carry commerce. He added that promoting BTC to stabilize USDe’s peg if their algorithm fails throughout bear markets is an enormous concern for him.
“If there’s a technique to quick BTC by holding some DeFi-wrapped BTC, the market measurement could be smaller than its TVL. It is a CeFi stablecoin run by a hedge fund, efficient solely in bull markets. Appropriate me if I’m incorrect,” stated Ki Younger Ju.
Once in a while we see one thing new on this house. I usually discover myself on the mid curve for an intensive period of time. I’m comfy right here. That being stated, there have been occasions on this trade I want I used to be extra inquisitive about, there have additionally been occasions I positively did…
— Andre Cronje (@AndreCronjeTech) April 3, 2024
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Ethena’s USDe Artificial Greenback
Ethena Labs claims the essential Bitcoin unlock to allow USDe to scale considerably from the present $2 billion provide to $10 billion market cap. Customers have to deposit stablecoins corresponding to USDT, FRAX, DAI, crvUSD, and mkUSD to get Ethena’s USDe.
In the meantime, it generates a yield of 37% by shorting Ethereum (ETH) futures and pocketing funding charges. Crypto consultants warn USDe is a brand new protocol and never a stablecoin and will have a optimistic or damaging yield based mostly in the marketplace situations.
In reality, Aave plans to drop MakerDAO’s DAI as collateral after MakerDAO proposed allocating 1 billion DAI stablecoin, practically 20% of its whole provide to USDe. AAVE chan founder Marc Zeller believes there’s a main contagion danger
Ethena (ENA) value fell 9% within the final 24 hours, with the worth at present buying and selling at $0.922.
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The introduced content material might embody the private opinion of the writer and is topic to market situation. Do your market analysis earlier than investing in cryptocurrencies. The writer or the publication doesn’t maintain any accountability on your private monetary loss.
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